Consumer spending makes up around 68 percent of the nation’s
gross domestic product. Consumer spending is individuals and families
purchasing groceries, clothing, recreation, stocks, insurance, education and
much more. The transactions cover a broad swath of economic activity.
Much of the nation’s consumer spending is captured via
retail trade. A useful retail trade definition is “the re-sale (sale without transformation) of new and used goods to the general public, for personal or household consumption or utilization.” Not all consumer spending is captured through retail trade transactions,
but a large share is.
Broad-category examples of retail trade sectors are motor
vehicle sales, furniture stores, electronic stores, building material stores,
grocery stores, pharmacies, gas stations, clothing stores and department
stores, among others.
Then there is the relatively new and emerging part of the
retail trade sphere — nonstore retailers. These are establishments that sell
products on the internet. Examples include Amazon, Zappos, Overstock.com, or
eBay. These types of retailers have grown rapidly in the past 15 years and
their presence is reshaping the retail trade landscape.
Whereas in the past nearly all retail transactions were done
through traditional brick-and-mortar stores, now a significant and growing
segment is diverted to internet sales. The consumer shops online and FedEx (or
like) delivers the product. One can see that the number of brick-and-mortar
stores and the level of local sales across the country are being endangered by
this economic evolution.
The brick-and-mortar reduction is beginning to show its
economic presence in the United States employment numbers. While the U.S.
economy is finally expanding at a healthy pace this side of the Great
Recession, one of the few industries not rising with this tide is retail trade.
While overall retail sales are increasing, employment is not.
Traditionally, as a population increases, retail trade
employment grows simultaneously, since population growth and consumer spending
volume is an integrated dynamic. If studied deeply, a certain ratio of retail
trade employment growth spawned from population growth would emerge. Before the
internet, the vast majority of all consumer sales occurred in the immediate
community or region. But now, the internet is diverting these sales away from
the local community — and with internet sales growing, its market share will
increase.
We do not yet know how much brick-and-mortar erosion will
eventually occur. And will such a phenomenon hit some areas more than others
(e.g., urban vs. rural, or local vs. tourist spending)? These are touch points
that economist will be watching as this internet sales phenomenon continues to
grow within the national and Utah economies.
In light of this change, in this quarter’s Local Insights we
are profiling retail trade employment throughout Utah’s local regions. This can
offer a profile of where retail trade is now in a local economy, and possibly
how much of the sector could become vulnerable to the internet-sales
phenomenon.
All regions can be viewed through the Local Insights
web
portal. The following is a retail trade profile for the Wasatch Front North
region:
Retail Matters in the Wasatch Front North
The retail trade industry is an important economic driver in
the Wasatch Front North. It employs nearly 28,000 people in the region — more
than 12 percent of total nonfarm employment. In Davis County, retail trade
employs a larger share than any other industry, and in Weber County it is the
third largest employer behind manufacturing and health care. Retail sales
account for some 57 percent of total taxable sales in the region — a
considerably larger share than the 52 percent statewide average.
The Rise of Online Retail
Due to consumers making more and more purchases online, the
demand for brick-and-mortar retail workers in the region has been softening.
Overall, employment in the Wasatch Front North has been growing at a rate of
about 3 percent on average since the end of the recession; but in traditional
retail, employment has been averaging just 1.7 percent. Prior to the recession
— and before online retail really took off — traditional retail employment was
clipping along at a much quicker average rate of 2.4 percent growth.
Non-store retail, on the other hand, has been booming in the
region. With the arrival and expansion of major online retailers, like Wayfair
in Ogden, employment in non-store retail has grown an average of 19 percent
annually since 2010. The share of total employment represented by non-store
retail has increased 137 percent over that time. The next highest employment
share expansion in retail was in the miscellaneous category (e.g., pet stores,
office supply stores, florists), which increased its share by a paltry 10
percent in comparison. Most other retail categories saw a decline in their
share of total employment.
Non-store Taxable Sales Are Gaining, But Not as Fast as
Employment. Why?
Taxable sales in non-store retail have not gained as a share
of total taxable sales as quickly as the employment share has increased. This
is primarily because sales taxes are collected by the state of the purchaser,
and then, only if the seller has a physical presence in that state. This means
that when Wayfair sells a rug to someone outside of Utah, there is money coming
into Utah (in terms of the jobs that the sale supports) but there is no sales
tax coming in to Utah. The only non-store sales taxes captured in Utah are Utah
consumers purchasing goods from retailers with a presence in Utah. Since a
large share of sales by local online retailers are to customers in other
states, it means that sales tax revenue lags compared to employment growth in
the industry.
An Aging Retail Workforce
Interestingly, the jobs in retail are not primarily younger
workers as one might expect. In fact, about 70 percent of the region’s retail
jobs are people 25 and older, and approximately 50 percent are at least 35.
There used to be more young workers in the industry. Prior to the recession in
2007, the share of 35 and older retail workers in the Wasatch Front North was just
40 percent.
During the Great Recession, the share of teenagers working
in retail plummeted from over 10 percent to about 5 percent and has remained
low ever since. The reduced youth base means there are fewer workers who stay
on and age into the older categories.
A Less Educated Retail Workforce
At the same time, the share of retail workers with less than
a high school education has increased significantly. This has been primarily at
the expense of individuals for whom educational attainment data are not
available (i.e., workers under the age of 24 — mostly students). Since 2007,
the share of workers with less than a high school education in Utah retail has
increased by more than 25 percent.
This does not appear to be an actual increase in less
educated workers. Rather, the drop in workers under 24-years-old is causing a
share increase for the existing less educated workers. As a result, the retail
workforce in the Wasatch Front North (and in Utah in general) is trending
toward an older and less educated demographic.
What is Driving This Trend?
Much of this trend is likely the result of young people
choosing to take jobs in other industries with better pay, as wages in retail
have suffered. Or they may be opting to finance their education rather than
work while attending school. But some portion of this shift is also being
driven by the structural changes taking place in retail due to increasing
online sales.
The Occupational Shift
The transition to non-store retail translates to shifting
demand for a different set of occupations required by non-store retail
operations. Traditional brick-and-mortar retail stores primarily need people to
work on the sales floor, such as retail sales workers and cashiers. Those two
occupations alone represent about 45 percent of all employees in traditional
retail. In non-store retail, on the other hand, the top two occupations are
customer service reps and shipping/receiving clerks. Freight and inventory
movers, order clerks/fillers, and truck drivers all play a much more prominent
role in non-store retail as well.
Generally speaking, these kinds of jobs tend to require more
time commitment than the most demanded traditional retail jobs. According to
the Conference Board’s Help Wanted Online® product (analyzes online job
postings), about 40 percent of job openings for cashiers and retail sales
workers (the top jobs for traditional retail) posted in Utah in the second
quarter of 2017 were part-time jobs. Only 20 percent of job postings for
customer service reps and shipping/receiving clerks (the top jobs for non-store
retail) were part-time. Positions that require more time commitment and more
fixed schedules are likely to be less attractive to young people — especially
students — who may be looking for opportunities that are less time consuming.
The Geographic Shift
In addition, there is a geographic component to this
transition. Traditional retailers tend to have many more locations spread out
geographically, making them more likely to have that cover a broader footprint
within the labor force. Online retailers, however, are generally centralized in
large warehouses, distribution centers, and office buildings that runs counter
to the disperse spread of traditional brick-and-mortar. As a result, it may be
harder for workers — especially younger workers — to get to and from these
jobs.
What It All Means
These structural changes are having a profound effect on the
retail workforce, and we can reasonably expect the resulting trends to continue
for some time. As new technologies and retail processes emerge, there will
doubtless be more shifts in this rapidly evolving sector. But for now, in the
Wasatch Front North region, we can expect fewer traditional brick-and-mortar
retail jobs, more non-store retail jobs, and an increasing share of retail
employment opportunities that may be challenging for our young population to
access.
Check Out the Viz
If you are interested in the details, the data visualization
below breaks out the various retail categories and allows you to compare sales
(as a share of total taxable sales) and employment (as a share of total nonfarm
employment) in each category (by county) over time. The relative changes in
taxable sales compared to employment are telling in relation to some of these
structural changes, although direct links are difficult to establish as there
are many other confounding factors. The tables at the bottom give the actual
sales and employment levels, summed-up for whatever you have selected in the
county and retail category filters.
